UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended January 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-8422
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TRANSACT INTERNATIONAL INC.
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(Exact name of small business issuer as specified in its charter)
CONNECTICUT 06-0732124
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
20 THORNDAL CIRCLE, DARIEN, CONNECTICUT 06820
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(Address of principal executive offices)
(203) 656-0777
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(Issuer's telephone number)
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(Former name, former address and former fiscal
year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES X NO
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of February 15, 1996 was 6,123,235.
Transitional Small Business Disclosure Format YES NO X
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1
TRANSACT INTERNATIONAL INC.
FORM 10 QSB - QUARTER ENDED JANUARY 31, 1996
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets
January 31, 1996 (Unaudited) and April 30, 1995 3
Statements of Operations (Unaudited)
Three and Nine Months Ended January 31, 1996
and January 31, 1995 4
Statements of Cash Flows (Unaudited)
Nine Months Ended January 31, 1996 and
January 31, 1995 5
Notes to the Financial Statements (Unaudited) 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2
PART I : FINANCIAL INFORMATION
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TRANSACT INTERNATIONAL INC.
BALANCE SHEETS
JANUARY 31, APRIL 30,
1996 1995
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 118,755 $ 140,950
Accounts receivable, net of
allowance for doubtful accounts
of $83,000 and $40,000 respectively 1,060,198 1,809,440
Inventories 274,147 325,428
Costs and estimated earnings in
excess of billings on incomplete
contracts 269,164 135,710
Prepaid expenses and other
current assets 84,617 90,873
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TOTAL CURRENT ASSETS $1,806,881 $2,502,401
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PROPERTY, PLANT AND EQUIPMENT, at cost 246,970 282,715
Less accumulated depreciation (201,339) (220,489)
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45,631 62,226
OTHER ASSETS 2,300 37,688
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TOTAL ASSETS $1,854,812 $2,602,315
========== ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 150,000 $ -
Accounts payable 1,179,070 649,894
Accrued expenses 518,306 510,881
Current portion of long-term debt 90,954 135,137
Billings in excess of costs and
estimated earnings on incomplete
contracts 99,347 653,317
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TOTAL CURRENT LIABILITIES 2,037,677 1,949,229
LONG-TERM DEBT 26,070 49,770
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TOTAL LIABILITIES 2,063,747 1,998,999
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STOCKHOLDERS' (DEFICIENCY) EQUITY
Preferred stock, no par value,
authorized 2,000,000 shares,
none issued -
Common stock, no par value,
authorized 12,000,000 shares,
issued 6,201,735 852,541 852,541
Additional paid-in capital 5,224,726 5,224,726
Treasury stock, at cost :
78,500 shares (29,606) (29,606)
Deficit (6,256,596) (5,444,345)
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TOTAL STOCKHOLDERS'
(DEFICIENCY)/EQUITY (208,935) 603,316
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TOTAL LIABILITIES &
STOCKHOLDERS'(DEFICIENCY)/
EQUITY $1,854,812 $2,602,315
========== ==========
SEE NOTES TO FINANCIAL STATEMENTS.
3
TRANSACT INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
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1/31/96 1/31/95 1/31/96 1/31/95
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NET SALES $1,488,820 $2,437,179 $5,368,203 $6,531,120
----------- ----------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 1,495,595 2,054,855 4,931,395 5,484,540
Selling and
administrative 397,313 345,115 1,237,264 1,278,090
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1,892,908 2,399,970 6,168,659 6,762,630
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INCOME (LOSS) FROM
OPERATIONS (404,088) 37,209 (800,456) (231,510)
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OTHER INCOME (EXPENSE):
Interest expense (7,045) (2,025) (14,082) (11,194)
Other income 44 14,630 2,287 19,210
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(7,001) 12,605 (11,795) 8,016
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NET INCOME (LOSS) $ (411,089) $ 49,814 $ (812,251) $(223,494)
=========== =========== =========== =========
NET INCOME (LOSS) PER
SHARE OF COMMON STOCK $ (0.07) $ 0.01 $ (0.13) $ (0.04)
=========== =========== ========== =========
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,123,235 6,093,235 6,123,235 6,093,235
=========== =========== ========== =========
SEE NOTES TO FINANCIAL STATEMENTS.
4
TRANSACT INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
1/31/96 1/31/95
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OPERATING ACTIVITIES:
Net loss $ (812,251) $ (223,494)
Adjustments to reconcile net loss
to cash (used in) provided by:
Depreciation of property, plant
and equipment 26,485 25,677
Changes in assets and liabilities :
Decrease(increase) in accounts
receivable 749,242 (129,097)
Decrease (increase) in inventories 51,281 (66,261)
Decrease in other current assets 6,256 22,289
(Increase) decrease in costs and
estimated earnings in excess of
billings on incomplete contracts - net (687,424) 405,319
Decrease in other assets 35,388 25,059
Increase in accounts payable and
accrued expenses 536,601 84,007
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NET CASH (USED IN) PROVIDED BY OPERATIONS (94,422) 143,499
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INVESTING ACTIVITIES:
Capital expenditures (9,890) (26,977)
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FINANCING ACTIVITIES:
Net proceeds - short-term borrowings 150,000
Repayment of debt (67,883) (112,467)
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NET CASH PROVIDED BY (USED IN) FINANCING 82,117 (112,467)
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NET (DECREASE) INCREASE IN CASH (22,195) 4,055
CASH, BEGINNING OF PERIOD 140,950 5,533
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CASH, END OF PERIOD $ 118,755 $ 9,588
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SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 14,082 $ 11,194
Income taxes - -
SEE NOTES TO FINANCIAL STATEMENTS.
5
TRANSACT INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
1. The balance sheet as of January 31, 1996, the statements of operations
for the three and nine months ended January 31, 1996 and 1995 and the
statements of cash flows for the nine months ended January 31, 1996 and
1995 have been prepared by Transact International Inc. (the "Company"),
without audit. The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included herein the Company incurred substantial
losses for the three and nine months ended January 31, 1996 and is seeking
to sell certain product lines. These losses are cause for concern about
the Company's ability to continue as an on going business. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty. The Company's continuation as a going
concern is dependent upon its ability to return to profitability and to
sell certain product lines at a price that generates sufficient cash flow
to meet its obligations on a timely basis. However, there is no assurance
that the Company will be successful in these endeavors. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, the
results of operations and cash flows at January 31, 1996 and all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's April 30, 1995
annual report to stockholders. Seasonality is not a major factor in the
Company's operations. The results of operations for the three and nine
month periods ended January 31, 1996 are not necessarily indicative of
those for a full fiscal year.
2. Inventories consist of raw materials and manufacturing supplies at January
31, 1996 and April 30, 1995.
3. Amounts per share have been computed using the weighted average number of
common shares outstanding during each period. No effect has been given to
shares issuable pursuant to outstanding options as their effect would be
antidilutive.
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TRANSACT INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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4. There was no benefit for income taxes in the three and nine month periods
ended January 31, 1996 and 1995, as the loss generated cannot be carried
back to offset income in prior years.
The Company has operating loss carryovers and investment tax credit
carryforwards for tax return purposes of approximately $6,000,000 and
$104,000 respectively, expiring in 1996 through 2009.
The tax effects of temporary differences giving rise to the Company's
deferred tax assets at January 31, 1996 are approximately as follows :
Net operating loss carryforward $ 2,300,000
Investment tax credit carryforward 104,000
Other reserves and liabilities 153,000
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2,557,000
Valuation allowance 2,557,000
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$ -
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Due to the Company's cumulative losses, management does not consider that
enough support to overcome the "more likely than not" criteria existed
at January 31, 1996 to record a deferred tax asset. As a result, for
financial reporting purposes, deferred tax assets are fully reduced by a
valuation allowance.
7
TRANSACT INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Sales for the three and nine months ended January 31, 1996 decreased 38.9%
and 17.8% respectively from the comparable periods of last year. Revenue
from sales of transfer balls, spare parts and projects for the three months
ended January 31, 1996 compared to 1995 declined approximately $887,000,
$46,000, and $14,000, respectively. Gross profit percentages for the three
and nine months ended January 31, 1996 and 1995 were 0%, 8.1%, 15.7%, and
16.0% respectively. The decrease in gross margins in 1996 were primarily
due to (i) a decline in sales of transfer balls and spare parts which have
a higher gross profit percentage than projects, and (ii) cost overruns in the
three and nine months ended January 31, 1996 principally on two projects,
both of which were completed as of January 1996.
The Company has incurred substantial losses for the three and nine months
ended January 31, 1996. These losses are primarily from (i) the reduced
sales of transfer balls which have a higher gross profit, (ii) the low gross
profit on projects, and (iii) lower revenues. These losses resulted in
a stockholders' deficit of $208,935 at January 31, 1996. The financial
statements have been prepared on a going concern basis. This basis assumes
the realization of assets and the satisfaction of liabilities in the ordinary
course of business. The Company has expectations that new business it has
vigorously pursued, over the past six months, will materialize during the
fourth quarter on favorable terms of payment which will help to mitigate the
Company's need for cash in short term. However, the Company's continued
existence is dependent upon its ability to generate capital from the sale of
certain product lines and ultimately attaining profitable operations. The
Company is pursuing the sale of certain product lines including its transfer
ball and ramp equipment product lines. There is no assurance that the
Company will be successful in these endeavors.
LIQUIDITY AND CAPITAL RESOURCES:
At January 31, 1996, the Company had a working capital deficiency of $230,796.
The Company's backlog at January 31, 1996 was approximately $3.8 million. It
is the Company's practice to have its subcontractors subject to the same
payment terms as the Company has with its customers. Thus portions of the
Company's sales contracts are financed by its subcontractors and not the
Company. The Company is exploring various ways to obtain additional working
capital in order to meet its current and future financing needs. This can be
assisted by profitable operations, but is dependent upon the sale of certain
product lines. However, in the event that the Company cannot generate
sufficient cash from the sale of its product lines or secure new business as
noted above, it is unlikely that the Company will have the necessary funds to
meet its current or future obligations.
8
PART II: OTHER INFORMATION
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TRANSACT INTERNATIONAL INC.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
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(a) Exhibits - 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSACT INTERNATIONAL INC.
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Registrant
DATE: MARCH 12, 1996 /s/ BRUNO S. FRASSETTO
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BRUNO S. FRASSETTO
President
DATE: MARCH 12, 1996 /s/ AXEL COELLN
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AXEL COELLN
Executive Vice President
(Chief Financial and Accounting Officer)
10